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The Road to Success for Chinese Companies Expanding Overseas

The Road to Success for Chinese Companies Expanding Overseas

Chinese companies expanding overseas should consider three things – infrastructure, local operations and global presence – when finding the right partner for international expansion.

Mention the word global expansion and the first thing that comes to mind is a west to east movement of companies looking to enter Asian markets like India or China. In the last decade however, this eastward flow has been supplanted with an increasing number of Asian companies going west. 

Having developed into engines of global economic growth and nodes of technological innovation, Chinese companies, big and small, are actively expanding their overseas footprint. In fact, in less than a decade, Chinese outbound foreign direct investment (FDI) has gone from practically nothing to more than US$100 billion annually [1], making the country one of the top cross-border investors globally. 

Southeast Asia is an increasingly attractive destination for Chinese companies. Home to more than 600 million people, a young and growing middle class, trade between Southeast Asia and China grew by 14.1% to a record US$587.87 billion last year, making it the fastest growth rate of trade between the two regions in the last decade [2].  

Taking the lead in the latest phase of China’s “Going Out” – a policy initiated at the turn of the century to increase the country’s outbound investment by encouraging companies to go abroad – are companies like ByteDance, Xiaomi and Tencent, who have enjoyed domestic fame and are looking for international success. 

With the Chinese economic boom slowing down over the years – growing at 6.6% in 2018, the lowest since 1990 [3] – market diversification is a good way to buffer against the shocks of economic cycles and market downturns. However, these companies are fast discovering that expanding into foreign markets can be tricky. 

While initiatives such as Belt & Road are opening new pathways to trade, investment and economic opportunity for Chinese companies across the region, significant infrastructural, cultural and operational challenges remain. Chinese companies can better prepare themselves for entry and success in the overseas markets by picking the right expansion partner for their data centre needs. 

Here are three things to consider when looking for the right infrastructure partner to go global with:

1. A solid, robust, and global digital infrastructure 

Chinese companies such as TikTok which has more than 1 billion downloads [4] and 500 million users worldwide [5] will have massive data processing and storage requirements. Robust digital and data centre infrastructure is essential in managing this level of expansion worldwide and growing capacity needs. A solid technology foundation is needed to ensure a smooth and secure experience for the growing customer base. Any outage can have a major impact on business operations and customer experience. It is critical to choose international partners that offer best-in-class service with highly resilient power, cooling infrastructure and multi-layer security to support the storage and processing of mission critical data, providing you with peace of mind and reliability that you need.   

2. An extensive global network enabling you to scale quickly

Tencent, which has been the number one gaming company in the world for the past five years [6], has stepped up its overseas expansion. A high-quality user experience, over a reliable and fast internet connection is essential to driving growth in this sector. Low latency helps to deliver that seamless user experience that gamers demand. This means having infrastructure close to population centres so that gaming performance is optimised for users. Furthermore, as cloud gaming continues to rise in popularity, it is also essential to ensure your partner can provide direct connectivity to cloud service providers. Plus, a suite of best-in-class data centre offerings and purpose-built data centres that can cater from single rack to multi-megawatt requirements, will ensure you accomplish your business goals today with an eye on future growth.

3. A global partner who understands local nuances

Every country is different and presents different cultural and operational challenges. Companies need a partner who has a wealth of in-country knowledge and understands local nuances. A well-established partner with teams on the ground not only simplifies the process of entering a new market but can also help devise your in-market strategy. A global partner who has local expertise means that your data centre infrastructure meets global standards and strict compliance structures and yet adheres to local regulations. Having a local team on the ground further enhances the overall customer experience as it allows for immediate and open cooperation without delays or misunderstandings on the ground.

As Chinese companies continue their quest to explore new countries, their digital footprint needs to keep pace and scale in parallel. Finding the right partner with robust digital infrastructure around the world, combined with local teams, can mean that expansion keeps pace with minimal disruptions.

Over the 2019 Alibaba Apsara conference and expo, Rebecca Ng shared further insights on the trends she has observed over the years with Chinese companies, factors to keep in mind when selecting a digital infrastructure partner as they ride on these trends and expand outside China, as well as new markets they should consider as part of their expansion strategy. Watch the video interview below:                                                      

 

 

 

[1] Ministry of Commerce, People’s Republic of China, 17 April 2019, MOFCOM Department of Outward Investment and Economic Cooperation Comments on China’s Outward Investment and Cooperation in the First Quarter of 2019
[2] The Jakarta Post, 31 Jan 2019, China and ASEAN doing well on economic, trade cooperation
[3] Nikkei Asian Review, 21 Jan 2019, China's GDP growth slows to 28-year low in 2018
[4] Business Insider Singapore, February 27 2019, TikTok was bigger than Instagram last year after passing the 1 billion download mark
[5] Influencer Marketing Hub, October 9 2019, 37 TikTok Statistics That Will Blow Your Mind
[6] VentureBeat, 9 May 2019, Top 25 game companies captured 77% of $121.7 billion market

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